DEVELOPMENT-MONGOLIA: Sputtering on Free Market Track

By Suvendrini Kakuchi Reprint | | Print |

Suvendrini Kakuchi

ULAN BATOR, Jun 25 1998 (IPS) - He lost his job three years ago and what he now makes from selling bedsheets and other work here in the bustling capital of Mongolia is not even a third of what officials say a Mongolian family needs to live decently.

But former driver Hatanbold considers himself luckier than most Mongolians who are still trying to make sense of – as well as a living in – the country’s fledgling market economy.

The former socialist country had taken a democratic turn in 1990, effectively ending the steady Soviet support that had kept its economy going for 72 years. Other countries such as Japan and the United States extended a hand as Mongolia struggled to keep on track while experimenting with a new economic system.

It managed an economic spurt of 3.3 percent in 1997 while growth this year is expected to reach five percent. But the east Central Asian country is still striving to keep inflation less than 20 percent.

It is also trying to avert social turmoil as the ranks of the unemployed swell – more than 72,000 of a total population of 2.4 million – and contribute to a rising discontent.

Government reports say the number of poor families grew by 46,200 in 1997. At present nearly 588,000 people, or about a fourth of the population, eke out a miserable existence.

And until he got “lucky” two years ago, Hatanbold, who looks older than his 34 years, was like most of the people who were in shock with the changes brought about by the new economic system.

In 1995, Hatanbold had lost his old driver’s job that, along with his education and health needs, he had always taken for granted under the socialist system. He was jobless for a year until he joined the shop and tailors project called ‘Tsekh’.

The project began in 1996 with a loan of 800,000 tughriks (930 dollars) from a Poverty Fund offered jointly by World Bank and the United Nations Development Programme (UNDP) to improve living standards in Mongolia.

A father of two children, Hatanbold earns 30,000 tughriks (about 34 dollars) a month that he says he spends solely on his family.

Given the rising prices of daily commodities, though, his income may not be buying much. Economists also reckon that for a Mongolian family to lead a comfortable life, its average monthly income should be 200,000 tughriks (232 dollars).

But observers say Hatanbold is right in considering himself fortunate. After all, only a select few are chosen as beneficiaries for the loans offered by the World Bank and UNDP. Indeed, only 25 out of an average of 3,000 applicants are selected each year to avail of the loans.

Ten people, including women and the disabled, are involved in the project that brings them a steady income through selling bedsheets and the ‘del’ (the traditional Mongolian garment) that they sew themselves. They also run a tiny bakery on one side of the shop.

The group rents a dingy room – actually a renovated toilet – in a crumbling grey building that is part of a huge housing complex in the center of Ulan Bator. According to the project’s figures, the workers spend 60 percent of their income on food and the rest on rent and their children’s schooling.

The work schedules are rotated among the staff. That is why Hatanbold sometimes sews shirts, while other days see him off to the Chinese border where he buys material for the sheets. There are also days when he is in charge of selling the items made by the group.

“On a good day I sell between five and ten sheets,” Hatanbold says, his wizened brown face breaking into a rare smile. Those “special sales days” usually happen at the capital’s open-air Black Market, where hawkers do booming business selling anything from fashionable Chinese-made apparel to rotten apples.

But with considerably cash-strapped shoppers always on the look- out for bargains, sellers like Hatanbold have to employ much charm and patience for each single sale. To be sure, it is a far cry from the way of life Hatanbold and the rest of Mongolians had been used to, in which the state took care of things for them.

Ironically, Mongolia itself seems to be having trouble practising the same self-reliance it now expects of its citizens.

Economist S. Nyamzagd, head of the Institute of Commerce says the country, which was left without an industrial or commercial base or sophisticated infrastructure when the Russians left, remains heavily reliant on foreign investment to improve the situation.

“The democratic government is desperately seeking foreign investment that will develop our transportation, energy, post and communication sectors,” he says. “Mongolia has vast untapped natural resources and can develop its farming and tourism industries.”

Copper, cashmere and gold are still Mongolia’s main sources of foreign currency. But revenue from these commodities has taken a beating. World prices for copper and goatskin have plunged and the national budget suffered a shortfall of more than 30 billion tughriks (35 million dollars) at the start of the current year.

At the request of the Mongolian government, Japan provides 10 to 15 billion yen (now just 69 to 103 million dollars) each year, making it the country’s top donor. The assistance is geared toward improving Mongolia’s ageing infrastructure – mostly related to transport and electricity, which analysts contend is only way of attracting foreign investment.

But Japanese business experts say the going for the country will not be easy. Landlocked, Mongolia lacks a port and has a small population – almost half of whom are herdsmen.

“Mongolia has to compete with countries like China and Vietnam for Japanese investment. Both those countries have the advantages that Mongolia has not — sea ports and big populations,” explains Professor Shinichi Kobuchi, at Asia University in Tokyo.

Most Mongolians believe, however, that they are already on a modernisation path that does not leave them much room to make a U- turn back to the old system.

And many of them are like Hatanbold, who is determined to make life better for his family despite mounting odds. “Our lives after the old system broke down is hard,” Hatanbold says softly, “but we had to do it or be left out of the outside world. We have to be strong and work hard for the next generation.”